The Future of Insurance - Why Life Insurers Must Adapt

The insurance industry is not the only business to struggle with understanding its data. But the sheer volume of information hitting insurers’ desktops on a daily basis means it cannot ignore the importance of acting now to embrace the latest technology in order to get to grips with the issue.

Disruption and innovation will alter established business models indelibly. We understand this since reinsurance was itself born out of innovation. As specialist product providers and managers of biometric risk, Gen Re makes a significant contribution to the structure of today’s global reinsurance markets. We recognise the way we go about things must fit the times.

Life insurers will soon find themselves in a technological-shaped future that is customer-centric. Life insurance is not a simple transaction which perhaps explains why so many don’t bother with it. However, if the industry makes better use of technology, it will make life insurance accessible for large numbers of people who have none or too little.

The life insurance industry is generally seen as slow to initiate change or even resistant to it. More likely its well-established and successful working practices make life insurers hesitant to commit to new ways without knowing whether the new ones will be adequate and stand the test of time. Contrary to opinion, life insurers are just like any retailer, and keen for greater engagement and sustained direct relationships with their customers.

It is important insurers do adapt to changes in technology merely to avoid being left behind and to stay relevant. How we behave and interact with people must give customers easier access, greater transparency, and more integrated and flexible solutions. Customer experience and behavioural economics play a role. Among other things, this means working with modern customers’ demands for products that are geared around their preferences and how they live their lives.

For example, we recognise fitness wearables have a part to play in maintaining good health. It’s why reward-for-fitness life insurance franchises have become popular in several markets. This is a clear sign of changing times; it shows people will share with their insurer some personal data when it provides them an advantage, such as a lowered insurance premium.

Personalised medical care increasingly involves self-monitoring with mobile apps in “mecosystems” that give individual patients a hand in maintaining or recovering their health. People are also encouraged to augment their electronic health records by filling the blanks between episodic doctor’s visits with digital lifestyle data from wearables and phones.

Individuals will begin to develop rich intelligence about their everyday health from data on exercise, sleep, mood, diet, heart function and more. Personal information like this is likely to prove as predictively powerful as the medical data traditionally used by insurers. The development of a parallel source of medical information means insurance companies need to change the questions they ask and where they obtain further evidence.

People will begin to expect an insurer to access their data and to do something tailored specifically for them with it. Social networks will help people with mutually aligned interests and common risk factors to form peer-to-peer insurance pools. Knowledge gained from consumer genetics tests or much wider use of genomics in medicine could mean people are much better equipped to make personal decisions about their insurability.

Disruption, though, won’t all happen at consumer level. To meet evolving customer demands, life insurance companies also must undertake some internal disruption. There are behind-the-scenes opportunities to harness technology in risk selection, administration and claims processes to the benefit of customers.

Companies are automating repetitive administrative tasks as quickly as possible. Blockchain technology will help insurers replace processes that need repeated paper transactions. Blockchain implements trusted and secure transactions with less bureaucracy, and since it works to decentralise administration, it is likely to be integral to the business models of new entrants to the life insurance market.

Life insurance is sold predominantly via an advised sale through some kind of human intermediary whereas the future may see direct-to-customer, affiliate or social media advice being driven by some kind of robotic algorithm. The adviser of the future will bring technology into their businesses and propositions.

If life insurers don’t make changes that provide an enriched digital experience for people, then someone else will. Technology will simplify our transactions allowing us to embed ourselves into the lives of customers as never before to support their financial and medical health.

We can predict a very different future for life insurers. It’s a future with the customer at the centre, and will be shaped by behavioural science and gamification, with social and peer-to-peer networking and smart devices all playing a part. While the basics underpinning life insurance will remain in place for many years to come, how people access it, the incentives it provides and its cost will all be shaped by technology. It’s not a one-off process, waves of disruption and continuous change should be expected.

It’s a fairly obvious point to make, but there isn’t one right answer. The future is about offering choice and multiple pathways to it exist. Gen Re’s flexible approach means we have no preconceptions about the changes technology will bring to life insurance and we will continue to work with multiple partners to help their visions for the future become a reality. We believe competition within the industry enhances quality and it is imperative that we bring high-quality technical solutions to all our customers.

As originally seen in “The Future of Insurance” published by Raconteur Media on October 12, 2016, in The Times.